David Ansel, also known as The Soup Peddler, was broke — the best excuse to start a new business model.

Instead of starting a restaurant or creating a new processed food product — both of which would require substantial capital — Ansel made soup from scratch and delivered it to customers who, until then, didn’t know they needed or wanted the service. In other words, he innovated a new business model.

Today, Ansel runs The Soup Peddler as a popular weekly soup subscription service — with soup now being delivered by trucks, not bikes — to thousands of customers, known as “Soupies.”

Being broke is the best time to bootstrap a company, experts said.

Recessions “signal a change in the status quo, that what used to work isn’t working. Because bootstrapping is trying to figure out a business model, it’s perfectly aligned with recessions,” said Bijoy Goswami, founder of the Austin Bootstrap Network. Constraint “creates innovation. When you’re backed in a corner, you will innovate and create something that you didn’t have before. That’s the problem with the funding-driven model; it eliminates constraint and kills the very thing that propels innovation.”

Ninety percent of businesses are “cookie cutter,” created from pre-existing business models that individuals execute, such as retail businesses.

The other extreme is the funding model, where entrepreneurs propose a business model and cultivate investors without proven results.

In the bootstrapping approach, the business model emerges at the end, after a product has been developed and vetted by customers, and, as a result, has achieved positive cash flow.

“I talk all the time to entrepreneurs and tell them the smartest thing they can do is bootstrap,” said Jamie Rhodes, CEO of market research and usability consulting firm Perceptive Sciences Corporation and chairman of the Central Texas Angel Network. “If they can bootstrap all the way to positive cash flow or close to it and prove a product is good so people will buy it, that will put them ahead of the line to get funding over people at earlier-stage companies who don’t have customers or cash flow.”

In a recession, bootstrappers “are going to be better off making progress to cash flow positive before going out and seeking investors,” Rhodes said. “The smartest ones will figure out how to do it without outside investors, and that way control their company, their destiny and their wealth.”

Local entrepreneurs such as Bjorn Billhardt, founder and CEO of Enspire Learning, Clayton Christopher, founder and CEO of Sweet Leaf Tea, Paul Carrozza, founder and owner of running equipment and apparel chain RunTex, and Dell Inc. CEO and founder Michael Dell all bootstrapped their way to millions of dollars — in most cases, without investor funding.

“Bootstrapping is not a funding mechanism, it’s a state of mind,” Goswami said. Bootstrappers — to survive in the early “valley of death” stage, when a company is most at risk of failing — court customers willing to try an unproven product. That involves getting people to try demos and entering into a collaborative relationship with them to develop a nascent producer further. During a recession, these so-called “innovator customers” are easier to come by, Goswami said.

“People right now are looking for things giving them greater efficiency and better ways to save money.”

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